The consumption function will shift upward if real asset and money holdings:
A) increase, if people expect prices to increase, if interest rates decrease, and if taxes decrease.
B) increase, if people expect prices to increase, if interest rates increase, and if taxes increase.
C) increase, if people expect prices to increase, if interest rates increase, and if taxes decrease.
D) decrease, if people expect prices to decrease, if interest rates decrease, and if taxes decrease.

Question

Quizplus · Accepted Answer

The consumption function shifts upward when consumers are more willing or able to spend. This happens when real asset and money holdings increase (providing more wealth to spend), when people expect prices to increase (encouraging spending before prices go up), when interest rates decrease (lowering the cost of borrowing and making saving less attractive), and when taxes decrease (increasing disposable income).

The Consumption Function Will Shift Upward If Real Asset and Money